food outlook No.2, June 2005 
global information and early warning system on food and agriculture(GIEWS)

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Basic food commodities

Other relevant agricultural commodities

Ocean freight rates


Special feature

Statistical appendix

Statistical note

Other relevant agricultural commodities



Banana import prices increased in Europe and North America in the first months of 2005 compared to the same period of 2004. The main reasons for this rise were reduced supply in several Latin American countries due to bad weather, high freight rates, firm demand in consuming countries and, in the specific case of the EU's new-member countries, the application since May 2004 of a banana import quota that is lower than their historical imports. However, import and export prices began to fall in March/April 2005, as production and exports rose in Costa Rica, Guatemala, Ecuador and Colombia, while demand remained stable in the main markets. Industry sources report that farm-gate prices in Ecuador decreased below the official minimum price of US$3 per box, and in some cases, fell to less than US$1 per box.



Coffee prices reached 101.44 US cents per pound in March 2005, a 67 percent increase compared to the level of 60.80 US cents per pound the corresponding month last year. In April 2005, the average daily price fell to 98.2 US cents per pound, following some profit taking by investment funds. Rising coffee prices were underpinned by stronger market fundamentals: reduction in output,growing world consumption, and an anticipated fall in stocks of green coffee worldwide. World coffee production in 2005/06 (October/September) is expected to reach 6.3 million tonnes, a decrease of 6.2 percent over 2004/05. In the main producer countries, Brazil and Viet Nam, the 2005/06 outputs are expected to decline by 18 percent and 11 percent respectively, which could lead to a continued upward trend in world prices for the rest of the year. Provisional returns indicate a 27 percent increase in global export earnings in 2004, suggesting that exporting countries might be recovering from the coffee crisis of the past five years (see Box).



World cocoa production is estimated to reach 3.2 million tonnes in 2004/05 (October/September), down from 3.4 millions tonnes in 2003/04, mainly as a result of lower than expected harvest in major producing countries including Côte d’Ivoire, Ghana and Indonesia. However, world cocoa grinding is forecast to grow by about 1 percent to reach 3.2 million tonnes in 2004/05, resulting in a 3.5 percent fall in stocks and a stock to grindings ratio of 42.3 percent, compared to 44.2 percent back in 2003/04. Against this anticipated market development, and concerns over continued unrest in Côte d’Ivoire, world cocoa prices increased from 67.35 US cents per pound in October 2004 to 79.72 US cents per pound in March 2005, before declining to 71.94 US cents per pound in April 2005. World cocoa prices should consolidate around 68-73 US cents per pound for the rest of the crop year.



World tea production in 2004 (January/December) reached 3.2 million tonnes, about 2 percent higher than 2003, largely as a result of favourable weather conditions. Increased output in major producer Sri Lanka, Kenya and China more than offset declines in India and Bangladesh. The FAO Composite price averaged US$1.65 per kg in 2004, about 9 percent higher than 2003. Prices were supported by rising tea quotations in Sri Lanka, which more than offset the depreciation of the Sri Lankan Rupee against the US dollar, and by the decline in the averaged tea prices at the Mombasa auction. The FAO composite Price in March 2005 averaged US$1.71 per kg, a 9.6 percent increase over the price reached in February, largely due to firm demand against smaller traded volumes in Mombasa and Calcutta auction markets. In April, the FAO composite price fell to US$1.63 per kg, slightly higher than the seasonal average for April which was US$1.59 per kg over the last 6 years.



The Cotlook ‘A’ Index, an indicator of world cotton prices, has recovered gradually from its low of US$1.12 per kg at the end of 2004 when record output was reported in the major cotton producing countries including Brazil, China, India, Pakistan and the United States. The world cotton price increased to US$1.25 per kg in early May 2005 largely due to the expectations of lower world cotton production in 2005, following reduced plantings in response to low prices in 2004 and of moderate increase in demand. The prediction that China would import nearly 3 million tonnes of cotton in 2005/06, a 60 percent increase from its actual imports in 2003/04 because of projected lower domestic production and higher mill consumption also provided support to the world price recovery over the past few months.

food outlook



Recovery in coffee prices

According to the International Coffee Organisation’s most recent market report, the ‘coffee crisis’ which saw prices fall between 1998 and 2001 to the lowest levels ever recorded, has ended. The implications of this for the 20-25 million poor households dependent upon coffee production were in many cases catastrophic in terms of unemployment and income loss, compromising food security and curtailing expenditures on health and education. In El Salvador, Nicaragua, Guatemala and Honduras the WFP distributed emergency food assistance to thousands of coffee producing families. A number of countries, mainly in Africa and Central America remain highly dependent on coffee for a significant share of their export earnings, and in these cases the price collapse inflicted generalised macroeconomic damage.

Coffee prices began to stabilise in 2001 and made a hesitant recovery through to the last quarter of 2004. Since then the recovery accelerated. Prices are now up to around 100 US cents per pound compared to 60 US cents per pound a year ago and have increased by more than 80 percent since the beginning of 2004. Average prices on the New York futures market reached more than 125 US cents per pound. Export earnings have increased correspondingly.

The coffee crisis provoked extensive discussion of alternative approaches to slow or reverse the long-run fall and short-run variability in prices, including supply controls, demand promotion, quality improvement. However, the recovery in prices has its origin in the same market fundamentals of supply and demand as did the price collapse. Just as the collapse reflected rapid growth in supplies against sluggish demand, so the recovery reflects the more favourable situation of lower supplies against strengthening demand. Total supply in 2005 is expected to be around 135 million bags compared to 151 million in 2004. This reflects reduced production – partly in response to the prolonged price slump – to an expected 106 million bags in 2005, down from 113 million bags in 2004. The Brazilian crop is critical to the overall global supply situation and is expected to be down this year to around 32 million bags from around 39 million bags in 2004. However, reductions in production are expected to be widespread, including in other major producers such as Colombia and Viet Nam. Given this improvement in market balance prices should continue firm.

However, while the recovery in prices is obviously good news for coffee producers it does need to be set in perspective. Prices have only just reached the average level for the 1990s and they are 25 percent lower than the average in the 1980s. Sustainability of the world coffee economy remains an issue, and the need for efforts such as quality improvement, product differentiation, diversification, and demand expansion to secure that sustainability remains.

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